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When All Else Fails, Use Common Sense In Writing Proposals and Developing Budgets

As we’ve written before, it’s important to carefully follow RFP directions when writing any proposal. Still, many RFPs are poorly written, repetitive, and often contradictory. If one finds a significant issue in the RFP, the only recourse is to contact the Program Officer listed in the RFP and ask for clarification in writing. If you get a response at all, it’s likely to be along the lines of “read the RFP.”

While this becomes pretty frustrating pretty fast, stay cool and use common sense in writing your proposal narrative and developing the budget. Let’s think about cost-per-participant issues as one example. In responding to RFPs for most human services project concepts, it’s pretty easy to figure out the capitated (“per head”) cost of delivering the proposed service. For example, if you propose to provide job training to 100 folks over three years and request a $1,000,000 grant, the cost per trainee is $10,000. The key is to make sure that your proposed service delivery model and budget are in line with funder expectations.*

Some RFPs provide specific guidance on the cost per client, such as the DOL’s YouthBuild program, which specifies around $17,000/trainee. Until about 10 years ago, when HUD stopped administering YouthBuild, it was about $30,000/trainee. The primary reason for the dramatic drop was that DOL finally figured out that grantees could easily satisfy the remedial education/GED component of YouthBuild by using a partnering charter school that receives Average Daily Attendance (ADA) funds—at no cost to YouthBuild.

This also creates a nice way of covering the required YouthBuild match. The YouthBuild match requirement has become sort of a legal fiction. Many SAMHSA RFPs include capitated funding ranges that vary by type of service (e.g., outpatient, intensive outpatient and so on). To have any hope of being funded, the budget has to hit those targets.

In some cases, however, the RFP doesn’t directly state a capitated rate. Often, it’s possible to figure out what the funding agency expects, if the overall impact is discussed (e.g., train 10,000 veterans) and dividing this info into the total amount available. In contrast, the ED Student Support Services RFP mandates the maximum grant and maximum number of participants, so it’s fairly obvious what the capitated rate should be, even though the RFP doesn’t explicitly state the capitated rate. One could propose a lower capitated rate, but why would you?

If you have no clue from the RFP regarding an appropriate implied capitated rate, you’re back to using common sense. Let’s say you’re a one high school local education agency (LEA or school district) in rural California with 500 students and one counselor. The counselor’s salary is $50,000/year, so the district is in effect spending $500/year/student on counseling, but wants to expand counseling because of a school gun violence incident, bullying outreach or whatever.

As luck would have it, the Elementary and Secondary School Counseling (ESSC) grant program does just that. In developing your ESSC proposal and budget, however, it’s a good idea to keep reality in mind and use common sense. If you propose a $500,000 annual ESSC grant, that would be a ten-fold increase over current service delivery levels and probably would not be well-received, even though the ESSC RFP does not specify a capitated rate for expanded counseling services. Instead, a $200,000 annual grant, along with an innovative approach to counseling, would be a more reasonable approach.


* You’ll learn how to calibrate expectations for cost through experience and through looking at a lot of RFPs.

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We Might Start Seeing RFPs Again, Now That the Latest Spending Bill Passed the House

Sharp-eyed readers of our email grant newsletter know that the last few months have seen few juicy federal RFPs appear. That’s not because we’re not looking for them—we are—but because Congress’s deadlock has meant that few federal agencies have been eager to put on RFP processes for programs that until funding for this fiscal year is assured.

But as of December 11, Congress finally passed a spending bill—and it doesn’t even appear to be a Continuing Resolution (CR), which has been the primary way Congress has conducted business over the last half decade. You might notice that the last link in the preceding sentence goes back to 2010.

It’s hard to say whether we’ll see more CRs in the next two years, but with Republicans controlling the House and Senate in the next Congress while a Democrat holds the White House, we’re betting on “yes.”

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Seliger’s Quick Guide to the Concept of “Program Income” in Developing Federal Grant Budgets

Almost all federal budgets require applicants to complete the ever-popular SF-424, which has been the cover page for federal grant applications since the Carter administration. The “SF” stands for “Standard Form,” but at the link you’ll find many variants of this “standard” form (don’t ask why). Regardless of the version, the SF-424 includes sub-forms, including the SF-424A, which is a summary of federal “Object Cost Categories.” The “Program Income” Object Cost Category is found near the bottom of every SF-424A.

The Program Income Object Cost Category represents revenue generated by grant implementation, but in most cases it’s a bad idea to declare any Program Income on the SF-424A. Even if Program Income exists, you shouldn’t list it because Program Income is in effect a deduction from the grant request. Let’s say that the Boys and Girls Club of Milaca, Minnesota* is seeking a grant to provide mentoring services for at-risk kids. All Boys and Girls Clubs charge nominal membership dues and/or user fees, although the dues/fees are often waived for various reasons. Still, Clubs charge dues/user fees to support operations and to make parents/caregivers** feel they’re paying for something. People value something they pay for, even when they pay very little, much more than something they don’t. Our applicant Boys and Girls Club would probably want to try to get the parents/caregivers of mentees (yes—this is right word) to pay dues, but this should never be shown on a SF-424A.

We’ll explain why by using a thought experiment.

Assume the mentor program grant request is $200,000. If $5,000 is shown as Program Income from dues, what is the size of the grant needed to implement the project? The answer is of course $195,000.

Almost all grant budgets are based on a “but for” or “gap” analysis—in other words, but for the grant, the project cannot be implemented or the grant represents the missing funding gap (see also our post on the dreaded supplantation concept). For most human services proposals, the grant always equals the size of the “but for” or “gap.” In addition to helping build the need argument, most federal agencies don’t want program income to be included in the proposal budget, as such income would also need to be tracked during project implementation. This would complicate reporting. The legal fiction is that there is no Program Income; both applicants and federal funding agencies usually agree to look the other way.

As in most grant writing generalities, there are exceptions to the No Program Income rule I’ve just illustrated. A good example is a HRSA Section 330 proposal budget for primary health care, which must show income for third-party payers like Medicaid and private insurance. Another example is the HUD Section 202 affordable housing development program. In Section 202 budgets, Section 8 rental income must be shown to demonstrate project feasibility. Affordable housing grants use the “but for” and/or gap analysis in supporting cash flow statements. Unlike privately funded market rate housing cash flow statements, however, which show an excess of income over expenses to prove feasibility, publicly funded affordable housing cash flow statements always show infeasibility. The infeasibility must be solved, or the gap closed, by the grant request.

Our advice to clients regarding Program Income is always, “when in doubt, leave it out,” but we’re just lowly grant writing consultants and our clients are free to ignore our advice, which they often do.

For example, last year we wrote a Family & Youth Services Bureau (FYSB) Transitional Living Program (TLP) for Homeless & Runaway Youth proposal for a very large homeless youth services provider in a big midwest city. Our client, like most similar faith-based homeless services providers, charges nominal rent to homeless youth living in their transitional housing facility and also requires that the residents work part time.

While this may be a good policy to encourage self-reliance among homeless youth, it’s a very bad idea to include this Program Income in the TLP SF-424A. TLP grants are supposed to help youth with no resources whatsoever and to house the most needy—not the ones who can work part-time or somehow have money for rent.

It was very difficult getting our client to understand this conundrum until we pointed out that they were inadvertently proving they didn’t need the grant amount requested, while opening themselves up to being seen as “cherry picking” the best homeless youth clients. I’ll leave the perils of implied cherry-picking in grant writing to another post, but cherry-picking is also usually a fast way to the exit in grant seeking.

If you want to include program income anyway, you should at least increase the total program budget so that the grant amount requested remains at the maximum allowable amount.


* When I was a kid growing up in Minneapolis in the late 50s, my dad was a big wrestling fan and I often accompanied him to watch wresting matches live at the very dingy Minneapolis Auditorium. One of my favorite wrestlers was Tiny Mills, “King of the Lumberjacks.” Tiny was kind of a good bad guy and was always introduced as being “formerly from Alberta, Canada, but now hailing from Milaca, Minnesota.” For some reason I found this endlessly amusing, only learning later as a teen going on road trips that Milaca is actually a charming town in North Central Minnesota on the way to the beautiful Lake Mille Lacs.

** In writing proposals about at-risk children and youth, always refer to them as having “parents/caregivers,” not just “parents,” to account for those living with grandparents or in foster care.

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DOL Issues FY ’13 YouthBuild SGA—If You’re A Current Grantee, Here’s How to Beat the Eligibility Restriction

The Department of Labor just issued the FY ’13 YouthBuild SGA (“Solicitation for Grant Applications,” which is DOL-speak for RFP), and $75,000,000 is available with 75 grants! We’ve written at least 20 funded YouthBuild proposals over the years, including two in the last funding round, so we’re more than a little familiar with this program, which is one of the best ways of funding job training for youth and young adults. DOL, however, has the following wrinkle stashed in the SGA, which is designed to prevent an agency that received a FY ’12 YouthBuild from applying this year:

An organization (based on its Employer Identification Number), may only be awarded one grant as a result of this competition. This requirement applies to both new applicants and previously funded applicants that have received a DOL YouthBuild grant in a previous competition. In addition, grantees who received funding from the Fiscal Year (FY) 2012 YouthBuild competition [SGA/DFA PY 11-06] are funded through December 2015 and these grantees (based on its Employer Identification Number) are not eligible to participate in this competition.

You’re a hungry grant-seeking puppy and there’s all this YouthBuild baloney in the refrigerator. Here’s how to pry the door open and get your snout in the YouthBuild trough.

Note that the restriction applies to a grantee’s Employer Identification Number (EIN). Many nonprofits have an affiliated nonprofit with a separate EIN. For example, lots of churches are 501(c)(3) organizations that have separate 501(c)(3) organizations to operate human services programs or outreach ministries. In a case like this, you can have the non-YouthBuild grantee entity become the applicant and the grantee become the partner.

Similarly, if your organization received a FY ’12 YouthBuild and wants in on this year’s action—and who wouldn’t—you can find a local nonprofit or public agency you know and love to serve as the applicant, while once again your organization slips in the partner role.

As a partner, you can still receive a large subcontract to provide such services as outreach, participant selection, training and/or case management, or smaller role by providing technical assistance to the applicant for a fee. At a minimum, the applicant collects a tidy administrative rake and the stature of being a federal grantee, while the partnering entity keeps churning the YouthBuild dollars. In some ways, this is similar to the fiscal agent relationship used by nonprofits in formation that we’ve written about before.

One one way to sell DOL on the partnership concept in through a deft targeting maneuver. Say your organization, which is an FY ’12 grantee, primarily serves African American participants. Find an organization in your community that works mostly with Hispanics or Pacific Islanders to serve as the applicant. Voila, the funding argument becomes: Let’s bring the expertise gained in providing YouthBuild services to one vulnerable community to bear on another. Suddenly, you’re not a greedy agency, you’re a hero! Such is the magic of grant writing and the knowledge gained from writing proposals since dinosaurs walked the Earth.

I know the above works, because we’ve done it a few times. For example, about eight years ago we had a large nonprofit substance abuse treatment client in a Northeast state for which we had written several funded SAMHSA substance-abuse treatment proposals. Along came an unusual SAMHSA RFP to provide treatment services to college students—but only Institutions of Higher Education (IHE) were eligible applicants.

Based on our advice, our client formed a partnership with a local IHE that agreed to serve as the applicant and fiscal agent, while providing access to students who would be the target participants. In return, the proposal included a huge subcontract under which our client provided essentially all project services, while the IHE administered the grant.

SAHMSA bought the concept and the grant was funded for over a million dollars, and it was one of only 12 or so awards made. Our client received solid funding for five years and applicant received free outpatient substance abuse treatment services for its students. If this can work with SAMHSA, which is a reasonably sophisticated federal agency, it should be possible to slip-slide around the YouthBuild applicant eligibility issue.

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Sequestration Still Looms Over the Grant World: Two Months and Counting

I wrote about the potential impacts of the then-looming fiscal cliff a few weeks ago. At the last minute—actually, about a day after the last minute—Congress and President Obama awoke from their torpor and passed legislation, which what’s left of our media immediately hailed as “preventing the nation from going off the fiscal cliff.”

Well, not quite.

Lost in the fiscal cliff hubbub was the fact the fiscal cliff was actually a two-step fall. The first step downward—massive tax increases on almost all Americans—was indeed averted. The second part of the Cliff, sequestration, however, wasn’t addressed.

Rather, it was kicked down the road by about two months. As I pointed out in my earlier post, sequestration will impact the wonderful world of grants much more than tax increases. The former means significant reductions in discretionary grant funding, while the latter means more “money for nothing and chicks for free.”

Over the next few weeks, the battle lines over sequestration will form as the new Fiscal Cliff takes shape. This, too this will be a two-step Fiscal Cliff. Step one is our old pal sequestration, while the second part will be raising the federal debt ceiling. While the two steps are not inherently intertwined, the timing virtually ensures that the debates over both will be.

If you’re with a nonprofit that’s drifted back into somnolence because the Fiscal Cliff has been averted, shake yourself awake because the roller coaster is about to start again. In many ways,* coming to agreement on the largely non-raising of taxes was fairly easy for Congress and President Obama to agree on, compared to the coming battles over sequestration and raising the debt limit.

While understanding the byzantine politics of these two issues is above my pay grade, the eventual outcomes will likely include either decreases in federal spending on discretionary grant programs or, at a minimum, a reduction in the rate of increase. Either course will have significant impacts for grant seekers.


* Free proposal lead-in phrase in here.

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Cliff Diving: Sequestration and A New Year’s Resolution for Nonprofits and Local Public Agencies Worried About the Fiscal Cliff and Grants

EDIT: It looks like we’re not going over the supposed cliff. But much of the analysis below will remain relevant in the coming years, as political fights about debt, spending, and taxation continue.

EDIT 2: The analysis below has been augmented with “Sequestration Still Looms Over the Grant World: Two Months and Counting.”

I find it hard to believe, but as I write this post in the waning hours of Sunday in the waning days of 2012, it seems that the President and Congress are actually going to do a Thelma and Louise and send us collectively off the dubiously named “fiscal cliff.”

If this happens, we may see sequestration. As I understand the implications of sequestration on domestic discretionary spending, including funding for block granted and competitive grant programs, this would mean at least an 8.8% haircut across the federal spending board. Since we’re now already three months into the FY ’13 budget year, however, there are only nine months left, meaning that the cutbacks could be as high as 15%.

Now, what “across the board” means is still subject to interpretation, as this has not actually been done before. One assumes current grantees would get an immediate budget reduction notice, while open RFP competitions might be scaled back. There would also significant impacts for federal sub-grantees for such locally administered block granted programs as CDBG, CSBG, OAA, and so on. The mechanics of sequestration are subject to murky federal regulations and a cadre of anonymous GS-12 and GS-13 budget officers spread across the departments, who are going to be in particularly bad moods coming back after their Christmas holidays to this morass.

The short-term impact of sequestration for garden-variety nonprofits and public agencies that have direct or indirect federal contracts, or are vying for discretionary grant funds, is sure to be confusion in the short term and chaos over the medium term. But—and this is big “but” (so to speak)—it’s not the end of the world. To quote REM, “It’s the end of the world as we know it and I feel fine.” While media pundits and trade association/advocacy groups will make a lot of noise, the grant world will return to normalcy once the temporary Federal crisis passes.

Despite sequestration and ongoing budget battles, I think significant cutbacks in federal funding for discretionary grants are unlikely, as least for the next few years. What is more likely is a slowing of the increase in federal spending, or as it is more popularly called in a phrase I’m beginning to intensely dislike, “bending of the cost curve.” Keep in mind that we have not had a federal budget in four years and probably won’t have one anytime soon, as the feds will continue to operate with continuing resolutions and baseline budgeting. Thus, unless there is a sudden come to Jesus moment among Democrats and Republicans, it will be the same as it ever was.

This brings me to my suggested New Year’s resolution for nonprofits and local public agencies–take a hard look at your current programs and new initiatives in the planning stages. While there will still be plenty of RFPs available, the competition for government grants is sure to be more intense as the nation stares down its tax and spending challenges.* Seek foundation grants too; as the economy has staggered out of the Great Recession, foundations have recovered investment losses and are going full steam in grant making.

For those nonprofits that survive mostly on donations, a bigger issue is the potential of limits on the charitable tax deduction, which we wrote about recently in “Nonprofit ‘Whales’ May Face Extinction with Potential Tax Law Changes.” In other words, diversify and your organization will thrive in the exciting new year.


* Free proposal word here. In grant writing, there are never any problems, only challenges.

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HUD Issues the FY ’12 Indian Community Development Block Grant (ICDBG) NOFA Not Long After the FY ’11 NOFA

HUD just issued the FY ’12 Indian Community Development Block Grant (ICDBG) NOFA (Notice of Funding Availability, which is HUD-speak for RFP). There’s about $61 million available for federally recognized Tribes, Alaskan Native Villages and selected Native American organizations. This is a great opportunity for eligible Native American applicants to fund housing, economic development and community facility projects, and maximum grants range from $600,000 to $5,500,000, depending on the location and number of persons impacted. The question is, why am I blogging about it, since it seems like another run-of-the-mill federal grant process?

The answer is in the timing of the NOFA release and deadline.

The timing issue caught my eye because the FY ’11 ICDBG deadline was June 15. The FY ’12 ICDBG NOFA was released on October 4 and the deadline is January 4, so two “annual” funding cycles will be completed within a year! Faithful readers will recall that I wrote several posts in halcyon days of the Stimulus Bill passing in early 2009, including February 2009’s Stimulus Bill Passes: Time for Fast and Furious Grant Writing. In it, I correctly predicted that the feds would have more than a little trouble shoveling $800 billion out of the door.

The Stimulus Bill also distorted the more or less predictable flow of other discretionary grant programs like ICDBG; while the Stimulus Bill unleashed a huge quantity of additional grant funds, there were few, if any, additional personnel to manage the process, as I observed then:

My experience with Federal employees is that they work slower, not faster, under pressure, and there is no incentive whatsoever for a GS-10 to burn the midnight oil. Federal staffers are just employees who likely don’t share the passion of the policy wonks in the West Wing or the grant applicants. They just do their jobs, and, since there are protected by Civil Service, they cannot be speeded up. Also, there are no bonuses in the Federal system for work above and beyond the call of duty.

The nearly back-to-back release of ICDBG NOFAs is likely the result of the Stimulus Bill backlog—something like the boa constrictor eating an elephant in Saint-Exupéry’s charming novella, The Little Prince. ICDBG-eligible applicants had to wait for the FY ’11 grants to be digested, and then they have the opportunity to apply all over again a few months later.

The lack of a federal budget for three years and the reliance on Continuing Resolutions (CRs) to fund federal agencies likely doesn’t help. While the media focuses on the upcoming election and never-ending economic challenges, Congress passes appropriation bills using CRs, which allows FY ’12 funds, like ICDBG, to become available. You can expect a flood of backlogged federal programs to issue RFPs in the next few months.

Given the chaos in the federal budgeting process, it seems like a good bet to apply for any grant programs that come along now because the funding cycles for ICDBG and lots of other programs are pretty screwed up. In the case of ICDBG, I have no idea when the FY ’13 ICDBG NOFA will appear, but there’s an opportunity for a second bite of the apple this year. It seems to me that any ICDBG-eligible entity should bite that apple (or is it a salmon? I leave it to readers to decide).

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Seliger’s Quick Guide to Developing Foundation Grant Budgets

Faithful readers will remember our post “Seliger’s Quick Guide to Developing Federal Grant Budgets.” This is a companion post for developing foundation budgets.

Unlike federal budgets, foundations rarely provide budget forms, or, if they do, the form is usually fairly simple and most grant writers, even novices, should be able to figure out how to complete it. The challenge is deciding what to present to the foundation and what format to use when a budget form is not provided. We opt for a simple Excel spreadsheet. If the concept of using Excel makes you break into a cold sweat, stop reading and learn how to use Excel immediately. I could place an illustration of a typical foundation proposal spreadsheet here, but we never post sample work products. For our reasoning, see “If You Want Free Samples, Go To Costco; If You Actually Want Proposal Writing, Go To A Grant Writer.” You’ll have to use your imagination to visualize what the spreadsheet should look like, but you’re grant writers and should have at least a soupçon of imagination.

Most of the foundation proposals we write are for project concepts involving operating support, a human services delivery project, start-up costs for a new nonprofit, or a capital campaign. The following applies to the first three (I’ll write a future post discussing capital campaign foundation budgets, which are structured differently):

  • Place a descriptive title at the top of the spreadsheet, such as “Project NUTRIA Three-Year Line Budget Spreadsheet and Justification.” Don’t forget to add your agency name above the title.* I like the look of the Center Across Selection tool in Excel, but choose your own actual formatting.
  • We use two broad line item categories: “Personnel” and “Other” in column A, which is usually titled “Line Items” or similar.
  • Starting with a “Personnel” header, list each administrative or project position as a line item row in descending order from the Executive Director down. Provide a subtotal row, then a row for fringe benefits. It is not necessary to itemize fringe benefits. Instead, express them as a percentage of the personnel subtotal in the first calculation column. Finally, provide a Personnel Total row.
  • Everything else goes into “Other” header. Provide enough line items to cover the activities noted in the proposal, but not so many as to make the spreadsheet print on two pages or be otherwise difficult to read. Typical “Other” line items include local travel, professional development, equipment, printing, communications, insurance, hourly staff (e.g., tutors for an after school program) expressed as hours (there are 2,080 hours in a person year, so two FTE tutors = 4,160 hours) in the first calculation column times an hourly rate in the second calculation column, and so on. Provide an Other Total row.
  • Provide a Total Cost row, which is the sum of the Personnel and Other Totals. If your agency uses an indirect rate, the Total row will be called Total Direct Costs, followed by an Indirect Costs row (expressed as a percentage of Total Direct Costs in the first calculation column) and a Total Project Costs row.
  • Moving across the spreadsheet from column A (line item names), the next two or three columns should be for calculations (e.g., numbers, months, percentages, etc., so the readers can figure out how your formulas are derived). The next three columns will be Year One, Year Two and Year Three yearly totals. The formulas in these cells will be multiplications of the calculation cells for each line. The next column will be the project period total for each line.
  • The last column should be larger and be titled, “Narrative Explanation” or similar. Place a brief description of the line item (“10 iPhones @ $200 ea. to enable Outreach Workers to connect with participating at-risk youth through social media, as detailed in the attached project narrative”). As I discussed in my post on federal budgeting, I see no reason to have long-winded budget narratives that regurgitate the proposal like Jon Voight by the eponymous snake in Anaconda.
  • Provide a bottom sum row for each project year and the project budget year total, perhaps with a cost/participant total, and you’re done.
  • Actually, you’re not quite done, as you will have to struggle with font sizes, row heights and such to get Excel to print the spreadsheet on a single, readable page. But grant writers love struggle, so this should be the fun part of the exercise.

It is OK to estimate most line items. As with all budgets, however, the most important aspect is to make sure that the budget is consistent with the narrative. For example, if the narrative discusses having Outreach Workers using social media to engage at-risk youth, there should be a line item in the budget for the cost of buying the phones and/or computers, as well as a separate line item for phone service charges. Also, I like round number budgets—say $250,000/year for a $750,000 project total. The round number can be easily achieved by making one row (e.g. participant incentives or advertising) a “plug number” (guessed flat per year number for a particular line item), rather than a calculated total. Keep adjusting the plug number in each year until you achieve the round number.

Although this kind of spreadsheet may seem too simple, it will provide enough detail for the foundation to understand your budget request. If the foundation gets interested in funding the project, you’ll know because, in most cases, the foundation will request additional budget details.


* “The Name Above the Title” is the title of a 1991 CD by the somewhat forgotten folk-rocker John Wesley Harding. I’ve been asked many times about the music I listen to while writing proposals. One of these days, I compile a playlist or two and post them. J.W. Harding might be on one of them.

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Seliger’s Quick Guide to Developing Federal Grant Budgets

Many novice grant writers, and more than a few old hands, are terrified of federal grant budgets. Oddly, I find budget development one of the easiest aspects of grant writing, so I thought I would provide Seliger’s Quick Guide to Developing Federal Grant Budgets:

* When you first read the RFP, ignore the budget instructions, except for the following: what is the maximum grant allowed, is the maximum grant for an annual budget or project period, is there a minimum, and what are the eligible and ineligible cost items? These answers are all you’ll need to develop the project concept and write the first two drafts of the narrative. When the second draft of the narrative is finished and incorporates changes to the first draft from all interested readers, you’ll have a more or less complete narrative description of the project concept, including a staffing plan. Budget development time will arrive.

* Learn to love the SF 424A, which is, as it sounds, the federal Standard Form (“SF”) for budgeting. The SF 424A is part of the SF 424, which is the basic “Application for Federal Assistance” or cover sheet used for most federal grant applications. This being the federal government, there are of course many different versions of the not-quite-Standard Form SF 424 and 424A, including alternate versions used by the Department of Education, HUD, DHHS, etc., as well as hard copy and Grants.gov versions.

But all SF 424A variants share common “Object Cost Categories”, which are found on Section B of the form. Object Cost Categories are the categories into which you have to allocate all budget line items. You’ll notice that the SF 424A Section B includes Object Cost Categories summary input boxes for grant costs only, which means you’ll have to create a line item budget using Excel or a similar program to calculate the Object Cost Category subtotals—unless you love using a pencil, legal pad and calculator and want to return to the Disco Era.

Once you have a line item spreadsheet created using the Object Cost Categories in column one, add as many columns as you need for the number of years. Keep in mind that you will usually need three columns for each budget year (“Federal,” “Non-Federal” and “total”), as well as three columns for the multi-year total, unless it is a one-year grant. Even though the SF 424A Section B only requests information for use of grant funds, you’ll need the non-federal amount to fill in the SF 424 and Section A of the SF 424A (I know there’a a lot of “A’s” and “B’s”” in all of this, but welcome to federal grant writing), as well as for the budget narrative (see below).

It’s always handy to have two or three calculation columns as well, which enable readers to easily see how you developed each line item (e.g., 12 mo. x $4,000 = $48,000 for the salary of the Project Director). Having been in business for 18 years, we have lots of SF 424A templates to use as a starting point, but I’ve never seen the feds bother to make one available. As far as I can tell, no one has told federal grant making agencies that Excel exists and it is still 1977 at the Department of Education.

* Now that you have a spreadsheet, it’t time to dream up the costs. That’s right, I said “dream up.” This is because federal budgets are rarely scored and all you really have to accomplish is stay within any maximum/minimum amounts and eligible/illegible item instructions in the RFP (see step one above) and make sure the budget is consistent with the narrative (this is why it is a waste of time to work on the budget until the narrative is gelled). “Consistency” means, for example, that if the narrative lists two Outreach Workers and a van for them to cruise around in, the budget needs to have these two positions listed under the Personnel Object Cost Category and a van lease under the Contractual Object Cost Categories. Most human services program budgets are composed of about 75% personal/fringe benefit costs and 25% everything else.

Thus, start with personnel and estimate salary costs, based on your agency’s current salary structure, calls to other agencies or the ever popular WAG method. Keep in mind that a person year is 2,080 hours, meaning that 1.5 FTE Outreach Workers can be calculated as 3,120 hours x $15/hour. Fringe benefits are expressed as a percent of salaries. Depending on the agency, fringes usually range from 15% to 30%. Part-time employees, interns and the like who do not receive full benefits are best listed in the Other Category, using an hourly rate jacked up by a dollar or two per hour to account for their reduced benefits.

* Once the Personnel and Fringe Benefits Categories are complete, it’s time for the rest. We rarely have more than about 15 line items beyond Personnel and Fringe in our budgets because it is a waste of time to have 100 line items. Remember, the budget is usually not scored, you’ll have to create a Budget Narrative (see below), and the more line items you have, the more complex the Budget Narrative becomes. Also, after you receive a Notice of Grant Award, you’ll have to negotiate a real budget with a federal Budget Officer anyway.

* The Travel Category usually includes milage reimbursement (always a popular line item with staff) and travel for conferences (an even more popular line item with staff). Your agency probably has a reimbursement rate of around .50/mile and, depending where you are in the country, $1,500 – $3,000 / person trip is about right for conference travel and per diem.

* We rarely use the Equipment Category in federal grants and you should avoid it as well. This is because the feds consider anything with a unit cost of less than $5,000 to be a “supply” and you can buy $4,999 copiers the same way you buy paper clips. As soon as the unit cost goes over $5,000, you enter the realm of federal purchasing rules, which is not a place you want to be. This is one reason vehicles and other big ticket items are better proposed as leases, even though it may make little economic sense. Remember, you are in the Proposal World, not the Real World.

* The Supplies Category is used for consumables and things most normal people would think of as equipment,but cost less than $5,000 each. Consultants, partner subcontracts, leases and similar items go into the Contractual Category. Construction is another Category we rarely use. Most federal grant programs specifically preclude the use of grant funds for construction and, guess what, there is yet another budget form, the SF 424C, for construction programs, which I will ignore in this post. Any quasi-construction “paint-up/fix-up costs,” modular buildings, etc., that you think you can squeeze by your Budget Officer should be put in the Other Category. The Other Category is loaded up with anything that doesn’t fit in the other Categories, including matching funds from your agency and partners, if applicable. This leaves the Indirect Charges Category.

Unless your agency has a federally approved indirect cost rate, based on an approved cost allocation plan, $0 is the correct entry for this Category. If you have an approved rate, it will be expressed as a percent of salary costs, total direct costs or whatever your rate approval letter states in the Indirect Charges Category. If you don’t have an approved rate and want to claim administrative costs, they would be placed as individual line items in the Other Category, assuming the RFP states that administrative costs are allowable. Typical administrative line items would be accounting, payroll, janitorial, purchasing, personnel administration, etc.

* It’s time for the fun-filled budget narrative. Typically, the feds do not provide a format for the budget narrative, instead going on for pages about what the narrative is supposed to include. If you want to return to the Disco Era I mentioned above, you could respond with something like the following for every line line item, ending up with a 25 page budget narrative:

Two Outreach Workers are needed to reach out to the target population because the target population is difficult to reach, doesn’t trust the government and is too busy doing other things to readily accept wraparound supportive services without being dragged to the intake center. The Outreach Workers will conduct outreach, using the Project NUTRIA van (see the Van Lease line item below in the Contractual Category for more detail), since the project area is pretty big and outreach will be conducted mostly at night, when it is also pretty scary. By having two Outreach Workers, outreach will be able to be conducted seven days per week for at least ten hours per day . . . and so on. Cost calculated as follows: 2 Outreach Workers x $2,500/mo. each x 12 months = $60,000. This salary is reasonable, based on salaries paid to Outreach Workers by the applicant and other agencies in Owatonna.

It’s easy to see how the above can get pretty tedious to write and even more tedious to read, particularly since the explanation for why Outreach Workers are needed should already be in the narrative. Instead of all this regurgitated drivel, we usually present our budget narrative in one of two ways: a “Narrative Justification” column in the Excel spreadsheet or a Word table that models the spreadsheet.

For the above example, the narrative justification would read something like this: “Two Outreach Workers to conduct outreach and intake, as detailed in the attached Project Narrative, 2 @ $30,000/yr.” That’s it. In 18 years of presenting simple and easy-to-understand budget narratives, I’ve yet to see any review comments that said the proposal would have been funded if only it had included an incomprehensible 25 page single spaced budget narrative instead of a one page Excel spreadsheet or two page Word table.

Now that you know how to tackle the federal budgeting challenge, go forth and budget.

EDIT: If you’re into budgets—and really, who isn’t?—you should also check out our “Quick Guide to Developing Foundation Grant Budgets.”

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Be Nice to Your Program Officer: Reprogrammed / Unobligated Federal Funds Mean Christmas May Come Early and Often This Year

I hope faithful readers who are also federal grantees have been nice to their Program Officers, because this could be the year that Christmas comes early and often.

I recently wrote about the unfolding FY 2011 federal budget fiasco. While cruising in the droptop to Palm Spring this weekend to visit relatives, I got to thinking about the next step: what happens when the Republicans win control of at least one house of Congress? Regardless of one’s politics, this looks certain. We’ll have a lame-duck Congress for a few weeks, during which a budget is unlikely to pass, and then an all-out political brawl when the new Congress starts fulminating on January 3. I’m guessing that the budget won’t get resolved until around March, which means the feds will probably operate under Continuing Resolutions for another three to six months.

If you have a direct federal grant and have been a good boy or girl this year by obligating your grant funds, filing timely reports and doing more or less what your grant agreement calls for (e.g., offering family support services but not leasing Porsches or going on site visits to Bimini), Santa may drop in. Provided that the stars align perfectly by having a full-scale budget rumpus unfold, preventing budget adoption by the lame duck congress, the political appointees who run federal agencies (e.g., the Under Secretary of Education for Undersecretarial Affairs) will quickly realize that they need to spend existing budget authority under their Continuing Resolutions ASAP or risk losing the money when the Federal budget is finally adopted.

In some cases, this will mean hurried-up RFPs processes, like the Department of Treasury’s CDFI program, HUD’s Healthy Homes Production Production Program (open, but with short deadlines), and the Department of Education’s Talent Search program (expected to be issued 10/22 with a deadline of 12/9—see theDraft Talent Search RFP for a glimpse of Days of Future Passed.* In other cases, however, the Program Officer may skip the RFP process entirely, however, and request applications from existing grantees. If you are a grantee, don’t be surprised if you get a call or email from your Program Officer in the next few weeks or months asking for a proposal with a week or two turnaround. While you’ll have to submit a technically correct proposal and be willing to accept whatever offer is made, you’ll have no competition. Just submit the proposal, sign the contract, and off you go!

In addition to trying to spend existing budget authority, Program Officers also sometimes have returned grant funds they need to “re-program.” This happens when a grantee screws up their grant, and, assuming that the grantee hasn’t obligated (there’s that word again) their funds, the Program Officer cancels the contract and takes the unobligated money back. To avoid losing the money when the next budget arrives, the Program Officer will sometimes unload the funds on another grantee she likes.

We wrote a funded HUD Lead-Based Paint Hazard Control (LBPHC) Program grant in the FY 2009 funding round, which was one of only about 30 grants awarded. Last week, I was talking to this client, and he told me that one of the other grantees had already had their grant pulled because of inactivity. The grantee simply couldn’t get their program launched and the HUD Program Officer lost patience. This gives the LBPHC Program Officer another $2 or $3 million for re-programming. I told our client to be ready for the re-programming call—and so should you!

I’ve experienced the joy of re-programming a few times before I was a consultant. When I was Development Manager for the City of Inglewood in the 1980s (per 2Pac, “Inglewood always up to no good”, I wrote about $20 million in funded FAA grants to support redevelopment under the city’s Airport Noise Control and Land Use Compatibility (ANCLUC) program. This was during the Reagan/Congress budget battles and I was invited to submit a last minute ANCLUC proposal once or twice when my Program Officer got the shanks (note for non-golfers: this is different from “being shanked” in prison).

I’ve heard similar tales from clients and others over the years. Between re-programmed funds and the irresistible urge of Program Officers to shovel money out before the budget door slams shuts, a perfect storm for multiple Christmases is brewing. If you get such a call and feel like sharing, post a comment and we’ll keep you anonymous. Let the grant holidays begin.


* This over-the-top pretentious Moody Blues concept album reminds me of my early grant writing days, as I listened to it about a thousand times in 1970s while I scribbled proposals on to seemingly endless legal pads—not an iPad.